06/22/2020

With the outbreak of the COVID 19 Pandemic, the last several months have brought significant changes to many aspects of our lives including business and personal components.  The area of employee benefits has also been one of the areas impacted by the pandemic.  Due to the recent updates and guidance issued by multiple government departments, we wanted to take this moment and provide a review of the changes that have taken place so far.

myCafeteriaPlan will continue to monitor guidance as it is issued and provide updates as necessary.

We wish you, your families and coworkers continued good health and well-being!

Health Savings Accounts (HSA)

• The IRS has confirmed the deadline to contribute to Health Savings Accounts (HSAs) for 2019 has been extended to July 15, 2020.  This is consistent with the 2019 tax filing deadline that has been extended to July 15, 2020.
• HSA contributions for a tax year can generally be made up to the tax filing deadline for that year.
• For more information, please see the Q&A released by the IRS as a follow up to IRS Notice 2020-18.
• Additionally, IRS Notice 2020-15 allows for COVID-19 testing and treatment to be covered by HSA qualified high deductible health plans before the deductible is met without affecting HSA eligibility for account holders.
• The 2021 HSA contribution limits have been released:
  • $3,600 – single coverage
  • $7,200 – family coverage
  • $1,000 catch up contribution for account holders 55 years and older

CARES Act

• The CARES Act includes the reinstatement of over-the-counter (OTC) medication as an eligible expense without the requirement of a doctor’s note or prescription for pre-tax spending
• These expenses are eligible as of January 1, 2020
• The CARES Act also includes menstrual care products under the category of eligible OTC expenses
• The addition of these expenses is a permanent change
• A document amendment is required if plan documents currently exclude OTC medication as an eligible expense
• The CARES Act allows Telehealth expenses to temporarily be reimbursed from HSAs prior to the medical deductible being met without affecting HSA eligibility.
  • Normally, Telehealth expenses are considered disqualifying coverage that would make someone ineligible to contribute to an HSA if they are reimbursed before the required minimum deductible is met.  These expenses are temporarily eligible through December 31, 2020.

IRS Notice 2020-29 and IRS Notice 2020-33

The IRS has released Notice 2020-29 and IRS Notice 2020-33 which outline several options available to employers to assist with flexible spending account (FSA) and dependent daycare reimbursement (DCAP) plans.  Below is a summary of the changes included in these notices.

1. Healthcare and Limited Flexible Spending Account Carryover Amount

IRS Notice 2020-33 increases the amount that can now be carried over into the next plan year for health and limited FSAs up to $550 for 2020.  The amount will also be indexed annually moving forward.  Employers can choose to allow for the indexed amount each year, or establish a lower rollover limit for their plan.

2. Additional Election Change Opportunities

Notice 2020-29 allows an employer to temporarily add additional qualified change in status events to their Section 125 Cafeteria Plan which would allow employees to make an election change for their FSA and DCAP accounts.  For the FSA and DCAP election changes, the employer can limit the mid-year election to the amount that has already been reimbursed.

• FSA Election – the employee may revoke their current election, make a new election or decrease or increase an existing election
• DCAP Election – the employee may revoke their current election, make a new election or decrease or increase an existing election
• An eligible employee may elect to participate in the plan if they had originally declined coverage.
• An employee may revoke an existing election to enroll in a different plan offered by their employer.
• An employee may revoke an existing election if the employee attests in writing they will have coverage or have already obtained coverage through another source.. The notice includes a sample attestation form that the employee can complete and sign.

Employers are not required to implement these changes and can use their discretion to determine which will apply to their plan.  Employers will still need to ensure their plan complies with all applicable nondiscrimination requirements.

All changes must be on a prospective basis only.

3. Claim Extension

Notice 2020-29 allows plans with a grace period or plan year ending in the calendar year 2020 an extension of clams to be submitted towards a remaining balance for that plan year if the expense is incurred by 12/31/2020.

Grace Period extended until 12/31/2020: For example, a plan year ending on 12/31/2019 that had a grace period through 3/15/2020 can allow an extension that would provide a grace period to be extended until 12/31/2020.  This allows employees with remaining balances the opportunity to be reimbursed for expenses incurred through 12/31/2020.

Extend the plan year ending in 2020 to 12/31/2020: For example, a plan year ending on 5/31/2020 may allow for an extension of claims to be submitted and incurred until 12/31/2020.  This allows employees the opportunity to use any remaining balance from the plan year ending 5/31/2020.

This extension could affect an employee’s eligibility to contribute to a health savings account (HSA) if they are covered by a general purpose FSA that allows for extended claim filing.

For the plan design changes listed above a document amendment will be required.  All of these updates are optional and employers can choose to implement some, all, or none of these changes.

EBSA Disaster Relief Notice

• EBSA Disaster Relief Notice 2020 – 01 temporarily suspended claim filing deadlines for employee benefit plans that are subject to Title I of ERISA.
• If your plan is not subject to ERISA, this suspension does not apply.
• The suspension is not optional and applies to plans subject to Title I of ERISA – including FSA and HRA plans
• Suspends any claim filing deadline that takes place during the outbreak period beginning March 1, 2020, plus an additional 60 days after the outbreak period has ended, but not longer than 1 year
• Applies for run out periods ending on or after March 1, 2020
• No additional claims can be incurred; only the claim submission deadline has been extended
• Could vary from region to region depending on the declaration of an emergency/outbreak in that area
• If a plan is subject to ERISA, for example the FSA, the dependent daycare plan can also have the extended time period if the document is amended
• No plan document update or amendment is required, however plan participants must be notified of the extension
• Suspension is mandatory and is separate from the optional claim extension plans may adopt as outlined in IRS Notice 2020-29

Patient Centered Outcome Research Institute Fee (PCOR)

• Group health plans are required to pay the PCOR fee for plan years ending on or after October 1, 2012 and before October 1, 2029.  The date has been extended from the original ending date of October 1, 2019.
• The fee generally applies to Health Reimbursement Arrangements (HRAs) because they are considered group health plans.
• Flexible Spending Accounts (FSAs) are exempt from paying the fee as long as they are considered an excepted benefit.
• The fees must be filed by July 31 in the year after the plan year has ended.  IRS Form 720 should be used to report and pay the fees. The following fees apply for the 7/31/19 deadline:
  • Plans ending from January through September 2019 – $2.45/covered life
  • Plans ending from October through December 2019 – $2.54/covered life
• For more information on the PCOR fees, please visit https://www.irs.gov/uac/newsroom/patient-centered-outcomes-research-institute-fee.

BusinessPlans, Inc. – myCafeteriaPlan does not intend to provide legal or tax advice and information contained in this article should not be interpreted as such.  Regulations governing pretax plans are often open to interpretation and should be reviewed with your legal or tax advisor before making any decisions regarding your plan.